8:30 am, May 9, 2012Updated: 12:19 pm, May 19, 2014

July 25, 2013

Thousands of doctors across the country are billing Medicare for routine medical care at rates far above their peers, potentially costing taxpayers tens of millions of dollars in overcharges, according to a new government report.

The audit released today by the U.S. Department of Health and Human Services Office of Inspector General stopped short of accusing the high-billing doctors of ripping off the government health plan for the elderly. But it stated that Medicare’s payment scales for doctors have been “vulnerable to fraud and abuse” in recent years.

The doctor payment scales are known as “Evaluation and Management” or E/M codes. Doctors choose from five escalating payment levels for treating patients based on the “amount of skill, effort, time responsibility and medical knowledge required for the service.” In 2010, almost 370 million E/M services were provided by about 442,000 doctors nationwide.

The code the doctor chooses can make a big difference to the bottom line. For instance, the Medicare fee for treating a new patient in 2010 ranged from $36.62 to $190.56, depending on the level of service provided by the doctor, and the code chosen for billing.

Using these codes, Medicare paid doctors and other health professionals $33.5 billion in 2010 for services ranging from routine office care to hospital or nursing homes visits.

That billing total represented a 48 percent jump since 2001, though the number of services delivered over the same time period grew only 13 percent. What the data reveal is that many doctors have been gravitating toward the codes that pay them higher fees for these routine services, a practice officials have struggled to understand and curb.

While billing for a higher code than warranted—a practice known as “upcoding” in medical circles—can be a crime, most of these cases are settled by asking the doctor to refund any overpayments. And given the sheer number of Medicare E/M claims, officials say they can do little more than trust the bills they receive are accurate and honest.

The inspector general’s audit suggests that officials have much work to do in policing the system and protecting tax dollars from doctors who take advantage of the lax oversight, however.

For instance, Medicare paid almost $108 million to some 1,669 physicians who billed the highest possible code for almost all of their visits in 2010, according to the audit. That amounts to a payment of $43 more than the average per service —even though there was little difference in the ailments they treated or the sickness of their patients, according to the audit.

In the same report, the federal Centers for Medicare and Medicaid Services said it had identified 5,000 physicians across the country who have “consistently billed for high level” codes and would notify them this month in hopes of preventing “improper billing and payment in the future.”

Yet CMS officials noted that their inquiries were “not intended to be punitive, or as an indication of fraud.”

The inspector general audit, though it mentioned previous cases of fraud involving the E/M codes, offered no explanation for the upward shift in billing by so many doctors.

“We did not determine whether the E/M claims from these physicians were inappropriate,” the report said. It said that later evaluations “will determine the appropriateness” of these payments.

The auditors found abnormally high billing doctors in all parts of the country, but said they were most common in California, New York Florida and Texas.

The audit comes amid growing controversy over how to compensate doctors, particularly those who provide routine medical services in their offices.

In 1989, as Congress was struggling to control rising physician fees, it set up a Medicare physician payment schedule that used a complex formula to hold spending in check. The rates are adjusted to reflect differences between spending targets and actual outlay.

But every year, in what is known as the “doctor fix” Congress steps in to prevent doctor fees from being reduced. Many critics argue that Medicare should move away from the system that pays doctors a fee for every service they provide and begin paying them based on the quality of care they provide.

The Center for Public Integrity is conducting an in-depth reporting project examining Medicare spending and its consequences for the quality of medical services to the elderly.